Introduction into The Forex Market | Lesson 1

Introduction into the world of Forex

We hope you find the content interesting, while we answer the question what is forex market and that this article is informative and helpful to your trading future.

You will learn about all the basic information regarding the Forex market. when is the forex market open does the forex market opening time depends on where ou trade, is the forex market live or is there a delay, and simple what are the forex market hours

In any kind of business, it is important to understand every aspect of the market, from the very essentials to the most complex issues that affect it. the live forex market is no different

Trading have many aspects and requires knowledge to make educated choices.

Analysis of forex market through the use of forex market charts is an art by itself, as a trader forex market analysis will become second nature and you will find that the news you often through to be boring all of a sudden holds a new meaning for you. the News in general and the forex market news will transform your reality as it involves everything around you in one way or another

We will analyze every aspect of Forex trading, from how it was formed, who are omvolved, advantages and disadvantages of trading the Forex market, how the Forex market compares to futures and equity markets and all concepts related to Forex trading.

What is The Forex Market? | Forex market definition

Forex is an acronym of The Foreign Exchange also called The Currency Market.

What is traded in the Forex Market?

Money, as simple as that!
Currencies are bought and sold freely. This is the simultaneous buying of one currency and the selling of another.
For instance, you have some inside information that leads you to think that the Euro will go up, you want to buy the Euro pair (or EUR/USD). When you buy the EUR/USD pair you are actually buying the EUR and selling the US dollar.

  • Another way of saying it is that when you buy the EUR it is also said that you are “long” the EUR.
  • and when you sell the EUR it is also said that you are “short” the EUR.

More than 80% of the volume is generated by what we call the seven major currencies:

  • The US dollar (USD)
  • The Euro (EUR)
  • The British Pound (GBP)
  • The Swiss Franc (CHF)
  • The Canadian dollar (CAD)
  • The Australian dollar (AUD)
  • The Japanese Yen (JPY)

When did it at all start?

You could not say it all started after a sole event. A series of events happened and in the end it resulted in the Forex market, as we know it today.

It all started when the Bretton Woods agreement was finally abandoned around 1971.
In this agreement, participating countries had their currency pegged to either the gold or the US dollar. By 1973 the most powerful countries around the globe introduced a free exchange rate regime where they let their currencies fluctuate driven by the market or more precisely by the forces of supply and demand. It was then when the Forex market was available to speculate, hedge as well as other reasons.

It was not until 1997 when the Forex market became available to individual investors and traders through online trading capabilities and leverage (margin trading), offering traders around the world great opportunities to profit from trading currencies.
The Forex market is now the most liquid financial market of the world, with a generated volume of nearly 2 trillion US dollars on a daily basis (more than all other US financial markets combined).

Where is the Forex Market located?

The Forex Industry, unlike other financial markets, has no physical location where all trades take place. The transactions are relayed via telecommunications (phone, online platforms, etc.) between banks, institutions, investors, traders, and so forth. This trade is called Over the Counter market or OTC.

In the Stock Market, all transactions are done through the NYSE (in New York for example), or through the LSE (in London for example).

In the Forex Market there is no one single location that funnels all the activity. You must be wondering how all these worldwide transactions are accounted for? Or maybe it's not even possible to measure the volume of all transactions in the Forex Market?

What are the advantages of Trading Forex?

When trading in Forex, there are several benefits that it has over the regular financial markets. A few advantages place the Forex Market high up on the trading list such as: liquidity, the fact that it works 24/5, low transaction fees, the ability to leverage trade (margin), specialized trading, low minimum investment and you can trade from anywhere in the world.

Liquidity -

Trading almost 2 trillion dollars on a daily basis, Forex is by far the most liquid financial market in the world.

Liquidity is important for the following reasons:

  1. The number one reason is that liquidity equals price stability. Being that the Forex market is so vast, it is likely that there will always be a buyer or a seller of any currency at the price quoted allowing for trades to open and close all the time, day and night. Keep in mind that there are times of high volatility, where trading may present difficult.
  2. Due to the large amount of liquidity, we can find ourselves entering and exiting the market quite quickly with good results, however, times that are more unstable may prove difficult to do so.
  3. Large liquidity doesn’t allow for controlled manipulation of the market – if you try to manipulate the market you would need huge amounts of money (I'm talking billions here) in order to make an effect, which would render this impossible.

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24/5 Market

As you already know, Forex is great for Insomniacs. the forex market clock keeps on running which means that even as the NY market closes, the Sydney one opens.

thou the forex trading close time for some markets the actual forex market is never trul;y closed. except for when there are forex market holidays which is widely published

You can open or close a position whenever you want, whether you started trading while the Sydney market opened and closed when the London market closed. Since the market is not located anywhere, the trading is endless and continuous.